GLOSSARY OF TERMS - N

Trade association of real estate professionals who manage the real estate assets of corporations, retailers, and other commercial users.

Trade association of companies and individuals engaged in the development and management of planned suburban business parks.

Trade association of organizations involved in the management of real estate for institutional investors.

Trade association representing publicly traded and privately placed real estate investment trusts (REITs).

Association of real estate professionals who serve on working committees, sponsor research articles, seminars and symposiums, and produce the NCREIF Property Index. Property index reports quarterly and annual returns consisting of income and appreciation components. The index is based on data collected from the voting members of NCREIF. Specific property-type indices include apartment, office, retail, R&D/Office and Warehouse.

Cash income is insufficient to cover current operating expenses, debt service, and cash needs for critical capital replacements.

Borrowed funds are invested at a rate of return lower than the cost of funds to the borrower.

Designed to provide convenience shopping for the day-to-day needs of consumers in the immediate neighborhood.

Net Before Tax Cash Flow (minus) taxable income (times) tax rate tax income (equals) Net Operating Income (minus) interest expense (minus) owner's deposit.

Cash remaining from net operating income after deduction of all expenses and expenditures.

Total revenue minus total expense, what's left of the monies received after all debts have been paid, the bottom line. If Net Income is positive it is also called Net Profit. A negative Net Income is a Net Loss.

Net Lease Properties are the traditional real estate investment with no management obligation for the owner. In its purest form (called a triple net lease) the tenant manages the property, doing everything from paying the taxes and insurance to sweeping out the driveway and repairing the roof if needed.

Effective gross income less all operating expenses and vacancy, but before debt service and capital expenditures.

An investment situation in which the cost of borrowed funds is exactly equal to the yield provided by the investment.

In its purest form (called a triple net lease or NNN lease), the tenant is responsible for all property management and repairs - including everything from paying the taxes to sweeping out the driveway to repairing the roof if needed. The only responsibility of the owner is to pay the mortgage on the property.

Rates quoted as NNN or "modified net" indicate that none or some of the services normally provided under a gross/full-service arrangement are included as part of the base rate. The tenant might be responsible for directly contracting with the applicable service providers for those desired services/utilities not provided through ownership. Property owners allow tenants to receive those services through the owner's base building equipment infrastructure. Under this arrangement, the tenant generally sends several checks out each month; i.e., one to the property owner for the base rent and other checks as required to the providing service/utility vendors. Generally Class "A, B & C" office rental expenses are quoted on a gross/full service basis while flex or industrial/manufacturing/warehouse space leases are quoted on a NNN or modified net basis.

A loan in which the lender cannot claim more than the collateral or property as repayment in the event that payments on the loan are stopped. The unpaid balance on the loan will be absorbed by the lender except in the case of fraud. The IRS requires a non-recourse loan for all real estate purchases that use leverage with a self-directed IRA. Most commercial real estate in the United States is financed long term by non-recourse debt. Most real estate in other parts of the world is financed with full or partial recourse to the borrower.

A use of a property that is permitted to continue after a zoning ordinance prohibiting it has been established in the area.

The substitution by agreement of a new obligation for an existing one or substituting new parties to an existing obligation.